What to expect from 2022 By Investing.com

By Alessandro Albano and Francesco Casarella

Investing.com – Lock in, Take Back, then Omicron. 2021 in the markets has been a turning point for investors’ choices, with perhaps more than anything the return of inflation and pending central bank decisions weighing on those choices.

Upstart digital coins like and, and meme stocks like GameStop (NYSE 🙂 and AMC Entertainment Holdings Inc (NYSE 🙂 have revolutionized the way markets work, for better or for worse, highlighting unexpected protagonists (the selves). – saying Redditers) who, much like David vs. Goliath, tried (and failed) to make their voice heard in a market too big for them.

Fed Chairman Jerome Powell, ECB President Christine Lagarde, and their peers dominated the headlines, hanging over an adjective, “transient,” which has never taken on such central importance on the markets and in the minds of investors that it did. this year, reaffirming that in the era of quantitative easing, communication is the most strategic tool in the toolbox of bankers.

So what are the most important issues facing investors? And will 2022 bring us a gradual return to financial and social normality? “Traders have in mind issues such as inflation and whether it is transient or not, the likely rate hikes by major central banks, and whether the high prices of risky assets, whether they are stocks, corporate or high yield bonds, are really sustainable, ”says MG Capital, setting the stage for what may be to come.

Summary of 2021 markets

2021 has undoubtedly been a good year for the major asset classes. Raw materials, driven by the end of containment, reopening and a very strong economic recovery, posted good performance. The (Linked ETF: PA 🙂 has risen by over 35% since the start of the year. The rise in inflation, allowed to persist thanks to the central banks, which initially considered it “transitory” before reconsidering their position at the end of the year, supported the valuation of these commodities.

However, a distinction must be made between the different commodities, as not all of them have had a positive performance this year. For example, among precious metals, gold and silver in particular suffered a decline, unlike energy commodities, especially oil. It should be noted that if historically gold is considered a safe haven especially in times of high inflation and therefore works well especially in very high and lasting inflation, it seems that at present we are only in the initial phase of this phenomenon. .

On the bond side, on the other hand, it has been said for years that those who hold bonds are doomed to suffer heavy losses, mainly due to a rise in rates. We’ll (probably) see these interest rate hikes in 2022, starting with the Federal Reserve, but 2021 ends with stable spreads across Europe and bond yields falling in the first part of the year. , although they managed to straighten up during the risk. off-peak periods (eg November). Overall, when you consider the different bond asset classes, the investment grade category is down around 1%. Emerging market bonds suffer the most (down + 10% for local currency bonds, according to Eaton Vance, and remain under pressure due to the strengthening of, which accounts for a large part of the currency of their debt.

Finally, with regard to the stock market, here as in past years many bears have been disappointed. The bearish thesis was: “If the stock markets rose in 2020 despite the lockdowns and economic shutdowns due to Covid, then the markets will certainly collapse in 2021”. Once again, however, the bull market that has lasted virtually since 2009 (if March 2020 is called a correction, however severe) continued its momentum, hitting brief bumps but climbing more or less steadily, again rewarding them. investors who avoided market synchronization and stuck with the market.

What to do in 2022

It is not possible to have a crystal ball, but in its annual investment outlook, Amundi states that “investors should start the year with a cautious / neutral allocation (also taking into account high stock market valuations) and try to take advantage of relative value opportunities present at regional and sectoral level.

For the French asset manager, it will be necessary to pay attention to “the illusion of nominal returns, aiming rather at real returns”, while the classic model portfolio 60/40 equities / bonds, “will be put to the test”. Indeed, the positive correlation between the stock and bond markets will require, explain the experts of Amundi, “a more dynamic asset allocation”, and the rise in rates will put pressure on “the high cost areas within the values growth “.

Stock selection should focus on profitable companies and ‘the power to pass higher costs on to clients, quality and value stocks’, while Europe’ should be prioritized through Next Generation EU program , with particular emphasis on ecological transition. “2022 should also see the return of emerging market equities to the fore.

The objective of investors, according to Matteo Germano, Head of Multi-Asset and CIO Italy of Amundi, must be “to aim for positive real returns and preservation of capital”. In the absence of alternatives, he adds, the stock market “remains privileged, but we must be careful in areas with excessive valuations or exposed to rising rates, focusing instead on more discounted markets such as European and emerging markets, and the value segment. More than ever, diversification will be essential. “

For analysts at Goldman Sachs Group, rising borrowing costs in different parts of the world will be a central theme for 2022, with earlier and faster interest rate hikes “likely to support higher yields. students”.

The Swiss giant UBS Group, meanwhile, expects a 2022 “two-speed”, with high growth and inflation rates in the first half “favoring cyclical markets, like the euro zone”. However, they say the reduction in growth and inflation in the second half of the year “will boost defensive sectors such as health care”, while still low levels of rates, yields and spreads “will cause investors to follow different yield pathways. “

“Longer term,” UBS adds, “the zero carbon transition and advanced technological revolutions will represent the most important investment trends of the decade, through opportunities in green technologies and sustainable solutions, as well as technologies. enabling factors such as artificial intelligence, big data and cybersecurity.

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